Increased digital purchasing isn't slowing physical sales

NEW YORK — According to a new report released today by market research group NPD, paid online music downloads have more than tripled among regular CD buyers so far this year.

Whether it’s fear of prosecution or simplicity of use, regular CD buyers are warming to legal online music sites. Better yet, their recent increase in digital purchasing hasn’t significantly eaten into their appetite for physical discs.

According to its most recent sampling, NPD said 5% of CD buyers reported using a legal service to purchase music during the first quarter of 2004, a level nearly three times that observed among the same sample in 2003 (1.7%).

While that may not amount to big business to record labels, downloading may not be the scourge once perceived.

According to NPD, the recent uptick in legal online music purchases coincides with a noticeable decline in the use of illegal peer-to-peer music file-sharing services. Among music buyers who purchased both physical CDs and a song download from a legal service, the likelihood that they downloaded a song illegally fell from 64% last year to 42% in 2004.

NPD research suggests that there’s only limited cannibalization of regular CD purchases. Among consumers who downloaded from a legal service or joined music subscription services, research revealed only a slight reduction in the number of purchased disks.

“Paid services like iTunes and Rhapsody appear to be attracting core music buyers, which can create a firm foundation for legal digital music purchases,” said Russ Crupnick, president of NPD Music.

Crupnick believes that the small reduction in physical CD sales may be offset by the overall value of the digital customer and the downturn in illegal file-sharing.

“The people who are really into music … are beginning to adopt paid digital services as an additional way of acquiring and enjoying music, and so far these services are living side by side with traditional CDs,” Crupnick said.

He said the jury is nevertheless out on how long it will take the mass market of more occasional music buyers to gravitate to online download sites, or what impact that shift will have on overall music sales.

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